Affordability changes – enhanced loan amounts
Your feedback has indicated a growing need for a more tailored approach to affordability to support the borrowing of a wider range of homebuyers. In response, we are introducing changes to our affordability model for specific criteria that will offer some more financially resilient customers greater lending.
This targeted enhancement ensures responsible lending while increasing the maximum amount available to customers who are borrowing at a maximum loan to value (LTV) of 75%, on a fixed term product of five years or more or are remortgaging to us without taking on additional borrowing. This could see the maximum lending amount increase by up to 9%, or around £25,000 on an average application.
From Monday 20th February our affordability calculation will show an enhanced maximum loan amount available up to 75% LTV for:
- Remortgage customers applying for a like for like loan amount with no extra borrowing.
- Purchase or remortgage customers selecting a fixed rate product with a term of 5 years or more.
The affordability result at Decision In Principle (DIP) will include any enhancement which applies. A new question - ‘Fixed rate product with a term of 5 years+’ Yes/No – is being added to the ‘Loan screen’ at DIP stage so if the term of the product preferred by the customer is known this enhancement can be reflected even when a particular product has not yet been selected.
Not all customers will see an enhanced maximum loan because if a loan to income (LTI) cap applies this will cap the maximum loan amount available as normal. No enhanced maximum loan amount will show above 75% LTV.
We will be updating our website affordability calculator with a new question for ‘Loan purpose’ with options for ‘Purchase’, ‘Remortgage with capital raising’ or ‘Remortgage with no extra borrowing’. The maximum loan returned by the calculator will therefore include any enhancement on a like for like remortgage.
Additionally, the calculator will show two maximum loan amounts including ‘An enhanced Loan amount may be available where a fixed rate product with a term of 5+ years is being chosen’. This second max loan amount will always be displayed but the figure may be the same as the standard maximum loan amount based on the LTV or if a LTI cap applies.
These changes will apply to applications, including DIPs, started from Monday 20th February.